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Restricted cash and the cash flow statement: Changes ahead!

More likely than not, you have some sort of restricted cash on your balance sheet. FASB has recently issued ASU 2016-18, which helps clarify a diversity in practice on whether these restricted funds should be included with cash on the cash flow statement or not….and the answer is YES. Examples of restricted cash include:

A debt service reserve fund

A replacement reserve

Donor funds required to be separated from other operating funds

Report in Total Cash

Rather than reporting the changes in these accounts in the investing or financing sections of the cash flow statement, upon adoption of the new pronouncement, you will need to report the balance in total cash. The new rule requires a reconciliation of cash and cash equivalents per the statement of cash flows to the amounts reported in the balance sheet. You can provide this on the face of the statement of cash flows or in a note to the financial statements, and it can be narrative or tabular in format.

For public entities this guidance is effective for fiscal years beginning after December 15, 2017. For everyone else, it is effective for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted.

This isn’t a major change, but one to keep in mind when 2018 and 2019 roll around.

If you want to learn more, or have any questions, please contact Jerry Cahill.

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